EPR Properties - Earnings Call - Q2 2025
July 31, 2025
Executive Summary
- Q2 2025 delivered modest top-line growth and strong GAAP EPS, with total revenue up 2.9% year-over-year to $178.07M and diluted EPS at $0.91; FFOAA/share rose 3.3% to $1.26.
- Versus Wall Street: revenue slightly beat consensus ($178.07M vs $176.51M*) and GAAP EPS materially beat ($0.91 vs $0.70*), while FFO/share was modestly below consensus ($1.24 vs $1.26*).
- Guidance unchanged for FFOAA/share ($5.00–$5.16) and investment spending ($200–$300M), while disposition proceeds were raised to $130–$145M from $80–$120M; net income/share guidance increased to $3.20–$3.36.
- Capital recycling advanced ahead of plan (three theatres sold in Q2 for $35.6M and ~+$16.8M gain; one additional vacant theatre sold post-quarter for ~$16.0M, ~+$3.0M gain expected in Q3), supporting portfolio repositioning and liquidity.
- Catalysts: improving box office and percentage rent outlook, accelerated pipeline with potential larger deals enabled by improved cost of capital, and raised disposition guidance signaling execution momentum.
What Went Well and What Went Wrong
What Went Well
- “Continued momentum…with solid earnings growth while maintaining our disciplined approach to capital allocation,” underpinned by FFOAA/share growth and strong GAAP EPS.
- Capital recycling outpaced expectations: Q2 dispositions of $35.6M (+$16.8M gain) and post-quarter sale of a vacant theatre for ~$16.0M (expected ~$3.0M gain in Q3), prompting higher 2025 disposition guidance to $130–$145M.
- Pipeline strengthening with >$100M committed to experiential development/redevelopment over next 18 months, and entry into traditional golf plus a second PINSTACK “eat & play” project.
What Went Wrong
- FFO/share modestly below consensus despite FFOAA/share increase; Q2 diluted FFO/share of $1.24 versus consensus ~$1.26*.
- G&A expense increased to $13.23M (vs $12.02M prior year) due to higher payroll and share-based comp, plus franchise tax normalization, partly diluting operating leverage.
- TRS operating properties: theatre improvements were offset by softer performance at Cartwright Hotel & Indoor Waterpark; management reiterated a move away from these types of investments longer-term.
Transcript
Operator (participant)
Hello and welcome to the EPR Properties Q2 2025 earnings call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now hand the call over to Brian Moriarty, Senior Vice President, Corporate Communications.
Brian Moriarty (Senior VP of Corporate Communications)
Thank you, Abigail. Thanks for joining us today for our second quarter 2025 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO, Greg Zimmerman, Executive Vice President and CIO, and Mark Peterson, Executive Vice President and CFO. I'll start the call by informing you that this call may include forward-looking statements identified in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The Company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of these factors that could cause results to differ materially from these forward-looking statements are contained in the Company's SEC filings, including the Company's reports on Form 10-K and 10-Q.
Additionally, this call will contain references to certain non-GAAP measures which we believe are useful in evaluating the Company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 10-K. If you wish to follow along, today's earnings release, supplemental, and earnings call presentation are available in the Investor Center page of the Company's website, www.eprkc.com. Now I'll turn the call over to Greg Silvers.
Greg Silvers (Chairman and CEO)
Thank you, Brian. Good morning, everyone, and thank you for joining us on today's Second Quarter 2025 earnings call and webcast. Our second quarter results underscore sustained momentum across our diversified portfolio, highlighted by solid earnings growth and a disciplined approach to capital allocation. Additionally, we've seen a significant improvement in our cost of capital, supported by the strong appreciation of our equity valuation during the first half of the year. Our elevated cost of capital dictated a measured approach to capital in our capital deployment. However, we have a robust pipeline of opportunities, including more than $100 million committed to experiential development and redevelopment projects in the coming quarters. While our investment spending guidance remains unchanged, our improved cost of capital positions us to accelerate our future investment spending.
Although the full impact of these efforts will play out over future quarters, our deployment strategy has clearly shifted within the last 60 days as our team is taking a more aggressive growth posture to pursue new opportunities. Our pipeline includes both opportunities, with both existing and new partners, spanning a broad range of deal sizes. However, with an improved cost of capital, larger deals are now becoming a possibility. We are also pleased with our ongoing progress in our strategic capital recycling, which is advancing ahead of our expectations. This initiative is pivotal as we further position our portfolio with productive and diversified experiential assets. Turning to our existing portfolio, our second quarter consolidated coverage was up slightly versus first quarter from 2.0 to 2.1. The box office remains a source of meaningful optimism.
We are seeing sustained momentum and resilience as major releases have generally met or exceeded their expectations, reinforcing positive consumer demand for theatrical exhibition. Notably, we anticipate that the Regal Master Lease will land near our percentage rent expectations, which is expected to generate a significant increase from 2024, an encouraging outcome driven by continued box office recovery and the enhanced economic alignment embedded in the revised lease structure. While the broader macroeconomic environment presents ongoing cross currents, our differentiated strategy provides both resilience and opportunity, anchored by a sustained consumer orientation toward experiential spending. Now I'll turn it over to Greg Zimmerman to go over the business in greater detail.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Thanks, Greg. At the end of the quarter, our total investments were approximately $6.9 billion, with 329 properties that are 99% leased or operated, excluding vacant properties we intend to sell. During the quarter, our investment spending was $48.6 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 274 properties with 52 operators and accounts for 94% of our total investments, or approximately $6.5 billion. At the end of the quarter, excluding the vacant properties we intend to sell, it was 99% leased or operated. Our education portfolio comprises 55 properties with five operators and at the end of the quarter was 100% leased. Turning to coverage, the most recent data provided is based on a June trailing twelve month period. Overall portfolio coverage remains strong at 2.1 times, an increase over last quarter.
Turning to the operating status of our tenants, the rebound in North American box office continues. Q2 box office was $2.7 billion, up 37% compared to Q2 2024, driven by a full slate of strong performing titles. Six titles grossed over $175 million, including a Minecraft movie at $424 million to date, Lilo and Stitch at $419 million to date, Sinners at $279 million to date, and How to Train Your Dragon at $254 million to date. For Q3, three titles are projected to gross over $200 million: Jurassic World Rebirth, Superman, and The Fantastic Four: First Steps. Jurassic World has already grossed over $286 million and Superman is at $260 million. Fantastic Four opened last weekend to $118 million. We are also very pleased with the success of Apple’s F1, which has grossed nearly $160 million to date, making it the most successful Apple theatrical release.
The slate for fourth quarter is anchored by three additional films projected to gross over $200 million: Zootopia 2, Wicked for Good, and Avatar: Fire on Ash. Box office through the first half of the year was $4.1 billion, a 15% increase over the first half of 2024. Our estimate of North American box office for calendar year 2025 remains between $9.3 and $9.7 billion. Turning now to an update on our other major customer groups, Andretti Karting opened in Oklahoma City on July 15th. Construction continues in Kansas City and Schaumburg with openings scheduled respectively for late 2025 and early 2026. Notwithstanding some macro pressures on consumers, our eat and play coverage remains strong and above pre-COVID levels. Importantly, across our portfolio, our operators are continually refining and developing promotional initiatives to attract customers and deliver value. Our attractions are open for the summer.
We are very pleased with the performance of Bavarian Innovation. Our major expansion was open for all of Q2 and is driving performance throughout the rest of the portfolio. Early season performance has been varied because of weather conditions, but historically they tend to even out over the course of the season. USA today recently ranked each of our three hot springs resorts in the top 10 of all hot springs resorts in the United States. Our recently expanded Springs Resort at Pagosa Springs is number one, our Murrieta Hot Springs Resort in Murrieta, California is number three, and our Iron Mountain Hot Springs in Glenwood Springs, Colorado is number five. We are leaders in this industry and have spent a lot of time focused on building a foundation with strong performing assets.
We see a lot of momentum and investment potential in the hot springs space as people across the demographic spectrum focus on wellness. The expansion at our Jellystone Cozy Rest RV Resort near Pittsburgh is complete and early season performance shows gains over Q2 2024 driven by the increased number of available rental units. Our education portfolio continues to perform well. Our customers' trailing 12 month revenue and EBITDAre across the portfolio for Q1 was essentially flat. Our investment spending for Q2 was $48.6 million, entirely in experiential assets and includes funding for projects that we have closed but are not yet open. Our year to date investment spending is $86.3 million.
During the quarter, we made our first investment in the traditional golf space, acquiring the land for $1.2 million and providing $5.9 million in mortgage financing secured by the improvements to Evergreen Partners for an existing private club in Georgia. We have spent a lot of time analyzing traditional golf while building deep relationships and we are delighted to announce our foray into what we think is an exciting growth opportunity in a resilient space with a growing outlook. We also acquired our second PINSTACK Eat and Play venue in Northern Virginia for $1.6 million with a commitment to provide build to suit financing for $19 million. This project is expected to open in 2026. PINSTACK features bowling, food and beverage, and redemption games.
As our cost of capital continues to recover, we are increasing our investment spending cadence as we head into the second half of 2025 and for 2026, we continue to see high quality opportunities for both acquisition and build to suit development in our target experiential categories. As we have mentioned frequently, we are especially bullish on the fitness and wellness space given our deep relationships, the increased focus on fitness and wellness among multiple generations and demographics, and a wide range of investment opportunities from hot springs to spas to fitness. Ramping up takes time, so we are maintaining our investment spending guidance for funds to be deployed in 2025 in the range of $200 million-$300 million. We have committed over $100 million for experiential development and redevelopment projects that have closed but are not yet funded to be deployed over the next 18 months.
We anticipate approximately $43 million of this amount will be deployed in 2025, which is included at the midpoint of our 2025 guidance range. We continue to execute our strategy to focus our portfolio on diversified experiential assets. To that end, in Q2, we sold a vacant former Regal Theater in California to Costco for net proceeds of $24 million, demonstrating the value of good real estate. We also sold two theater properties at a 9% cap to a smaller operator who leased both locations from us. Total proceeds for these three theater transactions were $35.6 million with a net gain of $16.8 million. Finally, subsequent to the end of the quarter, we sold our last vacant AMC theater in Hamilton, New Jersey to the Children’s Hospital of Philadelphia for net proceeds of approximately $16 million and a gain of approximately $3 million.
In the past four years, we have sold 31 theaters. We have one remaining vacant field. Year to date we have sold approximately $130 million of assets. We are revising our 2025 disposition guidance to the range of $130 million-$145 million, from a range of $80 million-$120 million. I now turn it over to Mark for a discussion of the financials.
Mark Peterson (Executive VP and CFO)
Thank you, Greg. Today I will discuss our financial performance for the second quarter, provide an update on our balance sheet, and close with an update on 2025 guidance. FFO as adjusted for the quarter was $1.26 per share versus $1.22 in the prior year, and AFFO for the quarter was $1.24 per share compared to $1.20 in the prior year, both an increase of 3.3%. Now moving to the key variances, total revenue for the quarter was $178.1 million versus $173.1 million in the prior year. Within total revenue, rental revenue increased $5.3 million versus the prior year, mostly due to the impact of investment spending and higher percentage rents. Percentage rents for the quarter were $4.6 million versus $2 million in the prior year, and the increase was due primarily to percentage rent recognized from one of our theater tenants.
The increase in mortgage and other financing income of $1.9 million was due to additional investments in mortgage notes over the past year. Both other income and other expense relate primarily to our consolidated operating properties, including the Cartwright Hotel and Indoor Water Park and our operating theaters. The decrease in other income and other expense versus the prior year is due primarily to the sale of three operating theater properties in the first half of this year. On the expense side, G&A expense for the quarter increased to $13.2 million versus $12 million in the prior year, due primarily to higher payroll costs, including non-cash share-based compensation expense as well as higher franchise taxes. As you may recall, in the prior year there was a legislative tax change that created a one-time benefit in franchise taxes.
Interest expense, net, for the quarter increased by $426,000 compared to the previous year due to an increase in our weighted average interest rate on outstanding debt due to additional borrowing on our unsecured revolving credit facility to pay off lower rate senior unsecured notes at their maturity. With regard to dispositions for the quarter, net proceeds totaled $35.6 million. We recognized a net gain on sale of $16.8 million. Note that this gain is excluded from FFO as adjusted and AFFO. FFO as adjusted for the six months ended June 30th was $2.45 per share compared to $2.34 in the prior year, and AFFO for the same period was $2.44 per share compared to $2.33 in the prior year, both an increase of 4.7%. To the next slide, I will review some of the company's key credit ratios.
As you can see, our coverage ratios continue to be strong with fixed charge coverage at 3.3 times and both interest and debt service coverage ratios at 3.9 times. Our net debt to adjusted EBITDAre was 5.1 times for the quarter. You adjust this ratio to include the annualization of investments placed in service, investments acquired or disposed of during the quarter, and the annualization of percentage rent, participating interest, as well as other items. This ratio was 5 times at quarter end, which is at the low end of our targeted range. Additionally, our net debt to gross assets was 39% on a book basis at quarter end and our common dividend continues to be very well covered with an AFFO payout ratio of 71% for the second quarter. Now let's move to our balance sheet, which is in great shape.
At quarter end, we had consolidated debt of $2.8 billion, of which $2.4 billion is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.3%. On April 1, we repaid $300 million in senior unsecured notes at maturity using funds available under our revolver. We have no other debt maturities in the next 12 months. Our liquidity position remains strong with $13 million cash on hand at quarter end and $405 million drawn on our $1 billion revolver. We are pleased to see the recent significant improvement in our cost of capital.
While our leverage is at the low end of our range and our 2025 guidance continues to have no equity issuance assumed, we are excited to announce that we are in the process of establishing an ATM program, which will provide us an additional tool in our toolbox for sources of capital. We are confirming our 2024 FFO as adjusted per share guidance of $5.00- $5.16, representing an increase over the prior year of 4.3%. At the midpoint, we're also confirming our 2025 investment spending guidance of $200 million-$300 million. We're increasing guidance for disposition proceeds for 2025 to a range of $130 million-$145 million, from a range of $80 million-$120 million. On the next slide, we are confirming our percentage rent and participating interest income of $21.5 million-$25.5 million and our G&A expense of $53 million- $56 million.
We're also confirming the guidance for our consolidated operating properties, which is provided by giving a range for other income and other expenses. Guidance details can be found on page 23 of our supplemental. Now with that, I'll turn it back over to Greg for his closing remarks.
Greg Silvers (Chairman and CEO)
Thank you, Mark. Lastly, I wanted to comment on Greg Zimmerman's planned retirement and the transition of the Chief Investment Officer role to Ben Fox, who will join the company in August as Executive Vice President. We are pleased that Greg will be staying into the first quarter of 2026 to ensure a smooth transition. Although it's not quite yet time to say goodbye to Greg, I would like to thank him for the significant contributions he has made to the company. While instilling a disciplined and thoughtful approach as CIO, he has also helped to navigate the company through some very challenging times, and we're thankful for his efforts. We're also very pleased to welcome Ben Fox to EPR Properties.
Ben brings substantial experience and expertise in the net lease REIT business, having served in senior positions at Realty Income and most recently in the Net Lease division of Ares Management Corporation. Ben will work with Greg during his remaining tenure, helping to ensure continuity, knowledge sharing, and continued success. With that, why don't I open it up for questions? Abigail?
Operator (participant)
Thank you. At this time, if you would like to ask a question, please click on the Raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. If you're on a mobile device using the app, simply tap into the three dots or more button to find the raised hand feature. Lastly, if you are calling in today, star nine will activate the raised hand and use star 6 to mute and unmute. We will wait just one moment to allow the queue to form. Our first question comes from Rob Stevenson with Janney Montgomery Scott. Rob, please unmute your line and ask your question.
Rob Stevenson (Managing Director and Senior Research Analyst)
Good morning, guys. Can you hear me okay?
Greg Silvers (Chairman and CEO)
We can, Rob.
Rob Stevenson (Managing Director and Senior Research Analyst)
Thank you.
Thank you. Greg or Greg, is there a significant amount of assets out there for sale at reasonable prices that you'd want to own? Does expanding your pipeline going forward here, at least in the near term, mean expanding the development pipeline as much or more than acquisitions? How should we be thinking about the acquisition market that you guys are in for quality assets at this point?
Greg Silvers (Chairman and CEO)
Sure. I'll let Greg comment as well. I think we're still seeing a robust amount of opportunities. As we've talked about, when you have a limited amount of capital, you're being very discerning, and yet, you know, what is the best targeted of that? It doesn't mean they're not good deals. You're trying to deploy that in the best manner, supporting existing tenants and otherwise. I think we still feel there's really good opportunities, and I think Greg would say that we're starting to see that growing.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah, 100%.Greg.
Rob, I would say well over half of our pipeline is acquisitions. To Greg's point, we've been unable to participate in some higher deal volume acquisitions just because we were being careful. We're always mindful of balancing development with acquisitions. To answer your question directly, I don't see us turning to a lot more development in the future to grow the pipeline. I don't think that'll be necessary.
Rob Stevenson (Managing Director and Senior Research Analyst)
Okay, and then how are you guys thinking about dispositions in the back half of this year and the early part of next year? You guys have been selling a decent amount of assets. Is there still more stuff that you want to do there and take advantage of the market and use that as capital, or, you know, were acquisition dispositions this year, you know, sort of more front end loaded and we'll see that sort of petering out in the back half of this year and into 2026.
Greg Silvers (Chairman and CEO)
I think, Rob, we've talked about, you know, we're already kind of at the low end of our guidance on that. There could be, but we have as a strategic objective to lower our theater exposure. You saw the first element of selling operating theaters. We will continue to look at that opportunistically as an opportunity to achieve that strategic objective and generate what we think could be meaningful capital. The range kind of says we're pretty much close to being done with our targeted disposition. As I said, we have strategic objectives that we will continue to pursue.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Rob, that would also include education. You know, we sold an education portfolio this year and we're always just opportunistic about that. If we get a good deal, we'll execute.
Mark Peterson (Executive VP and CFO)
I think the good news is we only have one remaining theater, a vacant theater, and there's no vacant education. The asset management team has done an excellent job of selling the vacant theaters. As Greg said, as far as the plan, there's not much to accomplish given the midpoint of our range isn't much higher than what we've done today at $130 million. Tom, some to come for the remainder of the year, but not much more in our plan.
Rob Stevenson (Managing Director and Senior Research Analyst)
Okay, and then last one for me, Mark, since I've got you, how are you thinking about the balance sheet over the next year? You move the $300 million of notes onto the line, you've got another $630 million of notes coming due next year in August and December. Are you thinking about doing something in the near term? Do you wait until sometime in 2026 and potentially lower rates to do something? How are you sort of thinking about balance sheet strategy over the sort of short and intermediate term here?
Mark Peterson (Executive VP and CFO)
Sure, yeah. Good question. As we look over the remainder of the year, if you look at our investment spending, we've got about $164 million left to hit our midpoint of guidance. As far as uses, we'll generate through remaining dispositions subsequent to 6/30, plus free cash flow, probably nearly $100 million. There's a net use there of about $64 million. Our line is at $405 million. I think the point is we have flexibility in that. We'd be less than half drawn even if we didn't do a bond transaction. That said, in the last half of the year, we do have a bond transaction contemplated which would bring down that line balance heading into next year and bring it down to a pretty low number.
As we head into next year, of course, as we look to those bond maturities later in 2026, we'd likely have another bond transaction to refinance those as well. That's kind of how we're looking at it in the near term.
Rob Stevenson (Managing Director and Senior Research Analyst)
Okay, thanks guys. Appreciate the time this morning.
Greg Silvers (Chairman and CEO)
Thank you.
Operator (participant)
Our next question comes from John Kilichowski with Wells Fargo. John, you may now unmute your audio and ask your question.
John Kilichowski (VP of Equity Research)
Good morning.
Can you hear me, team?
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yes. Yes.
John Kilichowski (VP of Equity Research)
Awesome. Thank you. On the disposition activity, it looked like pretty good execution on the theaters that you sold at a 9. These are non-core assets. How should we think about the demand for these assets and maybe pricing for your more core assets?
Greg Silvers (Chairman and CEO)
I think what we would say is, you know, we're seeing the beginning of activity in the theater space with recovery in the box office.
These are clearly not, these were not major markets nor was it a major operator. How that translates we'll just have to see. Clearly there is more interest in this space and we're starting to see more activity in the acceptance of it again as an asset class. Greg, maybe.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah, and more broadly, John, I would say, you know, within the past two years we sold two Titanic museums for cap rate in the low 6% and we sold a theater portfolio for cap rate in the low 7%, if that helps on, you know, the non-theater portion.
Mark Peterson (Executive VP and CFO)
No education.
John Kilichowski (VP of Equity Research)
Got it. Maybe on the percentage rent side of things, just to sort of bifurcate it into the theater and non-theater portions. It sounded like your commentary around theaters felt very positive. I'm curious how the box office today stands maybe from your beginning of the year expectations, and if there's some conservatism in not moving up your expectations around it. Part two of that would be, you know, what comprises maybe the other half or the other part of percentage rent, and are there any opportunities for upside that you're seeing that you just haven't baked in yet?
Greg Silvers (Chairman and CEO)
I think what I'd say is we've got a really good, Greg and his team has a really good group of people who understand the market and are very good at their predictions. I think as my comments indicated, we're coming at or right on top of what we thought was our early predictions. I would tell you honestly, it's an over the river and through the woods. Some movies we thought would do well didn't and some that we didn't have predicted actually do quite well, and they balance each other out. Overall we feel, yeah, you know, pretty good in that side, I think for the rest of the year. I mean it's coming from everywhere. It's coming from ski, it's coming from attractions, it's coming from education. Again, we'll see how it plays out if there's additional upside in that.
I think like I said, Greg and then Mark and his team in putting together the ranges and the estimates, we feel really good about kind of how we've approached that and that's why we haven't moved that yet.
Mark Peterson (Executive VP and CFO)
From a mixed perspective, theaters represent about roughly a third of our kind of the midpoint of guidance. You kind of get a perspective that a lot of it's coming from a lot of other categories, as Greg mentioned: eat and play, ski, attractions, gaming, fitness. We get it from a lot of different areas, so put some context around it.
John Kilichowski (VP of Equity Research)
Got it. Thank you.
Mark Peterson (Executive VP and CFO)
Thanks.
Greg Silvers (Chairman and CEO)
Thank you, John.
Operator (participant)
Our next question will come from Upal Rana with KeyBanc Capital Markets. Upal, you may now unmute your audio and ask your question.
Upal Rana (Equity Research Analyst)
Hey, good morning, everyone. You know, Greg, you mentioned larger deals are more likely prepared remark
Greg Silvers (Chairman and CEO)
probably lost you.
Upal Rana (Equity Research Analyst)
Hey, can you hear me now?
Greg Silvers (Chairman and CEO)
Yes, we can hear you now. Sorry, could you start your question over, please?
Upal Rana (Equity Research Analyst)
Sure. Greg, you mentioned larger deals are more likely. Could you give us a sense of what's out there in the market that's attracted to you and what potential cap rates on those deals potentially look like?
Greg Silvers (Chairman and CEO)
Again, I'll let Greg jump in. I don't know that I think it's broadly, I mean, without going into too much detail over specific transactions, I think we're seeing it pretty much across the board and seeing opportunities. I think we're still comfortably in the eights on where we're looking to Greg.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah, 100% comfortably in the eights. We're always looking at deals in a wide spectrum of ranges. We're looking at deals in the $10 million range and we're looking at deals in the several hundred, and there are deals in those categories. As we both said in our scripts, we're seeing opportunities in all of our verticals. Open gaming.
Mark Peterson (Executive VP and CFO)
Yeah.
Upal Rana (Equity Research Analyst)
Okay, great.
That was helpful. I had a question on fuel costs. It's down about 10% this year, and I'm curious if this has any impact on your customers and their willingness to either visit more of your properties or spend more at your properties. Just want to get your thoughts there.
Greg Silvers (Chairman and CEO)
I think anything that creates additional discretionary income is positive and it's helping to offset some inflationary factors for the consumer. I don't know that there's any direct correlation that we're seeing, but it's probably welcome in the pocketbooks of our consumers. That's much appreciated.
Greg Zimmerman (Executive VP and Chief Investment Officer)
In today's world, we feel like being in the experiential space is a positive because people still want to get out and do things.
Upal Rana (Equity Research Analyst)
Okay, great.
Thank you.
Greg Silvers (Chairman and CEO)
Thank you.
Operator (participant)
Next question will come from Anthony Paolone with JPMorgan. Anthony, you may now unmute your audio and ask your question.
Anthony Paolone (Analyst)
Okay, thank you. The first question relates to just the deal pipeline. You mentioned some larger transactions that you're starting to see as well. Can you maybe just give us some sense as to, you know, what definition of larger would be for you all?
Greg Silvers (Chairman and CEO)
I think for us we would think of it as $100 million plus. I think when we were thinking of a midpoint of $250 million, looking at a $100 million transaction takes nearly 40% of your deal. We were, and I know Greg and his team were a little bit hesitant to deploy that in one thing, but with our cost of capital becoming more favorable, I think we're looking at those. I would say that's the term I would dimensionalizing I would use.
But Greg.
Greg Zimmerman (Executive VP and Chief Investment Officer)
No, I agree. Yeah, Tony, I think the best way to think of it is in terms of, you know, in relation to our guidance. $100 million and some in the high tens of millions. Yeah.
Anthony Paolone (Analyst)
Okay, thanks. On these transactions, you mentioned your better capital costs make you more competitive. If we think about the last, I don't know, few quarters or so, have these deals been occurring away from you in the market or have they just not happened and they might still be out there? Just trying to understand like who's being competitive, as you know, before your capital costs improved here.
Greg Silvers (Chairman and CEO)
Yeah, I actually think that these have been more that are just starting to come to the market, that people are gaining more acceptance that we're not going back to, you know, substantial low cap rates. There have been kind of major transactions that have occurred. If you look in the attraction space, Parques Reunidos did a $700 million attractions deal that we were solicited for a bid on and really couldn't participate. There were big transactions I think that ended up going on a debt route, but there were transactions that were occurring out there and we were asked to be part of a solution and really just couldn't. We feel now that those are starting to open up for us.
Anthony Paolone (Analyst)
Okay. If I could just sequence for Mark, given where the stock is now, I think you're kind of in the money on the two convertible preferred. Is there anything for you all to do there? Like can you convert them? Does that make sense or can you call them? Just noticing that it's been a while since spending the money on those.
Mark Peterson (Executive VP and CFO)
Yeah, they're not really callable. You could go on the market and tender for them, but that would be at a premium to market price. It really doesn't make sense. It's also hard to cobble together any meaningful amount. We've looked at that in the past, so wouldn't expect anything happening on those two preferreds.
Anthony Paolone (Analyst)
Okay, thank you.
Mark Peterson (Executive VP and CFO)
Thank you, Thomas.
Operator (participant)
Our next question will come from Smedes Rose with Citi. Smedes, you may now unmute your audio and ask your question.
Smedes Rose (Senior Equity Analyst)
Hi.
Thank you. I wanted to ask you just a little bit more about establishing the ATM program. As you think about potentially raising new equity, what kind of spreads are sort of like maybe a minimum between cap rates and how you think about your weighted cost of capital? Do you look at kind of consensus NAV or an internal NAV? Maybe just help us think about when you would pull the trigger on issuing new equity.
Greg Silvers (Chairman and CEO)
I'll let Mark jump in on this, but historically we look at all those things. We look for, to be able, it's actually a balance of what we can buy assets at and accretively deploy. Historically, that's kind of required a minimum of 100 basis points that we've looked at. I think what Mark will tell you is, again, I think we're getting prepared.
It doesn't mean, as he said in his comments, that we have any imminent equity issuance. The idea is that we want this tool in the toolbox as we go forward and as we begin to continue to execute on our plan, it will create the optionality that we're looking for.
Greg Zimmerman (Executive VP and Chief Investment Officer)
But Mark.
Mark Peterson (Executive VP and CFO)
No, I'd agree.
We generally look at cost of capital and probably in the primary sense, is it accretive to deploy equity into a deal kind of on a 60% equity, 40% debt basis. Does it make sense to raise equity? As Greg said, we generally look for that 100 basis points of spread.
Greg Silvers (Chairman and CEO)
Initial.
Mark Peterson (Executive VP and CFO)
Initial spread. It's not to say we could do less than that to further diversify our portfolio, but that's generally how we look at it. I think the ATM provides us another source of capital. We've used the direct share purchase plan, which is another, you know, the ability to, the direct share purchase plan to dribble out shares. I think we've raised over, since I've been here, probably in excess of $700 million in that regard through that plan. The ATM provides us the ability to do kind of larger block issuances and also to look at the ability to do forward. Like Greg said, no imminent issuance in our plan. We're at the low end of leverage and we don't have any equity in our plan. This will just give us another tool as we go forward.
Smedes Rose (Senior Equity Analyst)
Okay, thank you. I wanted to ask you, I'm sorry you might have said this, but does your guidance still contemplate a bond deal later this year to pay down the credit line?
Mark Peterson (Executive VP and CFO)
Yes, it still does.
Smedes Rose (Senior Equity Analyst)
Okay.
Mark Peterson (Executive VP and CFO)
Okay.
Smedes Rose (Senior Equity Analyst)
Thank you. I appreciate it. Thank you. Sweet.
Operator (participant)
Our next question comes from Jana Galan with Bank of America. Yana, you may now unmute your line and ask your question.
Jana Galan (Analyst)
Thank you. Good morning. It's great to see the event coverage improve quarter over quarter.
Given the continued headlines on kind of the pressured, more pressured consumer, I was curious if you could talk a bit on how coverage ranges between your different concepts or segments. At the eat and play locations, I think last quarter you mentioned that, you know, everyone was showing up but maybe not eating as much. I am just curious if that trend is continuing this summer.
Greg Silvers (Chairman and CEO)
Again, I think it's always, and we've seen this, that, you know, the consumer is aware and looking for value. I also think our eat and play tenants are responding to that and creating different ways to engage with the consumer and creating value. I think overall coverages have been relatively stable. The uptick is probably more about the recovery and the continuing recovery of the theater space. Given the fact that that's only 37%, that means the other part of that has to be relatively stable, and I think we've seen that. I think not as much as the consumer. Weather and heat and then rain have impacted some attractions, but that's kind of normal, those are kind of the things that are normally incurred. We're still seeing really good resilience in the consumer as evidenced by some of the recent Fed and GDP growth that we've seen generally.
Operator (participant)
Thank you. Our next question will come from Catherine Graves with UBS. Catherine, you may now unmute your line and ask your question.
Kathryn Graves (Analyst)
Great.
Good morning. Thank you for taking my questions. Can you all hear me?
Greg Silvers (Chairman and CEO)
Yes.
Good morning.
Kathryn Graves (Analyst)
Awesome. Thank you.
Great.
My first question, you mentioned that you have no vacant early childhood education center properties at this point. You didn't sell any in the second quarter. I was wondering if you could just talk a little bit more about what makes an early childhood education center property a good candidate for sale, what you're seeing as far as interest in those assets, and would you be looking to do primarily more portfolio sales or would you be willing to sell some on a one-off basis?
Greg Silvers (Chairman and CEO)
Yeah, I mean I think what makes a good sell is a very attractive cap rate. I mean it's just that candid. We continue to field calls for people who are interested in the space. I think the way our remaining tenants are set up, they're probably going to be more in portfolios, meaning we would sell a tenant exposure. The way those are grouped together now, that probably means, Greg, they're probably in the $40 million-$100 million range when you would dispose of those. Yeah, some of that is just candidly, Catherine, just being opportunistic. That's a space that's been very, very resilient. I mean Covid created actually strength in that space with the elimination of a lot of at-home child care options. We're not unhappy at all with the space.
As Greg talked about in his comments, it's performing very well and we look at that as opportunistically. When things are presented to us, we'll evaluate them and see if they.
Make sense for us and to amplify that there's a broad market for them. We're not really concerned about the ability to transact.
Kathryn Graves (Analyst)
Got it. That's helpful, thank you. My second question, there's been a couple of headlines of Six Flags closing or preparing to close a couple of their parks. I was just wondering if you could provide some color on how you're thinking about your exposure to that tenant and just sort of your comfort with that tenant going forward.
Greg Silvers (Chairman and CEO)
Yeah, I mean, I think we see those in our discussions with them, and they will comment on their own. As you know, this is a continuation of the merger of kind of rationalizing their fleet of locations. Candidly, opportunistically selling and deployment of what we think are, will be accretive transactions for them. I mean, people forget that often these locations are in and around major metropolitan.
Areas with somewhere in the neighborhood of 300-400 acres. When you look at some of the areas they're in, sometimes there's just a higher and better use that generates a great sell price. I commend them for aggressively looking at their overall strategy to lower their debt level. When they can sell out at a property and make substantial gains and lower and create a better credit tenant for us, that's a positive.
Kathryn Graves (Analyst)
Got it. That's really helpful. Thanks so much for the color.
Greg Silvers (Chairman and CEO)
Thank you.
Operator (participant)
Our next question will come from Ryan Caviola with Green Street. Ryan, you may now unmute your audio and ask your question.
Actually, it's Spencer here. Hi guys. Just one for me.
I was hoping you could.
Good morning. I was hoping you guys could provide an update on the competitive landscape. I was also wondering, do you guys tend to see more or less competition for deals as you go up in check size.
Greg Silvers (Chairman and CEO)
Again, I think it changes. What we see is, especially on $50 million or less, it's a lot more. We occasionally see some of the other REITs, but also family office. As you move up in deal size, that group kind of falls away in the sense that anytime with private equity, their second question is how do I exit this? In three to five years, a lot of these are kind of long term capital. I think we start to see a different set of competitors. That's nothing new for us, Spencer. That's been that way for our 27, 28 years. I think it's not, I wouldn't say that the number of competitors are more robust, but I would say the interesting thing is the credit funds and their need to deploy capital becomes more into that side of the equation when it's larger. Greg, I don't know.
I think you.
Mark Peterson (Executive VP and CFO)
I agree.
Okay, that's helpful. Do you guys get inbounds from sellers often, especially maybe just for some of the larger deals, or ever just get like a first look just given your brand in the space?
Greg Silvers (Chairman and CEO)
Those are the calls we love.
Greg Zimmerman (Executive VP and Chief Investment Officer)
I'd say honestly, Spencer, more often than not, we see most deals for sure. Okay, great.
Thank you, guys.
Greg Silvers (Chairman and CEO)
Thank you.
Operator (participant)
Our next question will come from Michael Carroll with RBC Capital Markets. Michael, you may now unmute your line and ask your question.
Brian Moriarty (Senior VP of Corporate Communications)
Yep.
Thanks, Mark. Given that we're pretty much at the end of July right now, will the Regal percentage rents that were reported in prior presentations and after the bankruptcy, matching what the box office is doing, is that still a pretty good ballpark of what we expect could be reported in July related to those percentage rents?
Mark Peterson (Executive VP and CFO)
Yeah, correct. I think that chart that we put out initially is still in line with our expectations.
Michael Caroll (Senior VP)
How many, how much percentage rents have been recorded so far in 2Q? I know that it's going to largely straddle between 2Q and 3Q. How much of a pickup could we expect in 3Q related to the percentage rents and the box office that we've already seen?
Mark Peterson (Executive VP and CFO)
Yeah, we don't get that specific. As far as tenants and what's in one quarter versus the next, I could tell you overall. Overall, for the quarter, we had $4.6 million of percentage rents. Obviously, looking at our midpoint, that's going to ratchet up in Q3 and Q4, probably fairly evenly between the two to achieve that midpoint of $23.5 million. The bigger chunk of Regal hits in Q3, but I think between Q2 and Q3 with respect to Regal, it's kind of in line with our expectations.
Michael Caroll (Senior VP)
Okay, and then just lastly on the Regal topic, I know you get paid based off of what the revenues at the Regal boxes. Right. How have those assets been performing relative to market? Is it largely in line? Do you typically see a lot of deviations between specific theaters within a market, depending on how well they're doing or not? Does that vary very much?
Greg Silvers (Chairman and CEO)
Yeah, no, that's exactly correct because it ends up being what is the market share of the individual theaters. Now, some of this, both good and bad, is impacted. This is really positive as we go forward, as Regal is investing back into these theaters and adding features, and some of those cause some disruption. There may be auditoriums that are shut down, but as we talked about, we still think we're hitting plan. We're getting new IMAXes put in at some of our theaters and things like that, which really bode well as we go forward because the consumer has kind of clearly demonstrated the demand for that type of product. But Greg.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah, Michael, I would say we're very pleased with how they've recaptured market share coming out of bankruptcy, come back to where we sort of thought they would. As we've shared with you before, it's very granular. It gets down to the number of hyper, you know, large format screens in any given theater depending on the film, and we monitor that closely. The takeaway is we're pleased with how they've recaptured market share and how.
Michael Caroll (Senior VP)
Are Regal largely making those investments by themselves?
Greg Silvers (Chairman and CEO)
Regal is making investments, and then remember, as part of our deal, we agreed to make certain investments with them as limited over a period of years, but it's at least 50% or more of Regal's investment.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah. They're required to prove that it'll be revenue enhancing before we are required to invest. Great, thank you. In other words, we get more percentage rent.
That's the idea.
Good.
Operator (participant)
Our next question will come from Kyle Bonke with Truist Securities. Kyle, you may now unmute your audio and ask your question.
Kyle Bonke (Analyst)
Thanks. Good morning. Can you guys hear me?
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yes.
Kyle Bonke (Analyst)
The box office guidance implies some acceleration into the second half of the year. I think most of that was addressed in the opening comments. Curious how the production pipeline looks today, more on a forward basis versus where you guys were last year, and if you expect to see a continued acceleration in number of releases.
Greg Silvers (Chairman and CEO)
I.
Think we're very encouraged. If you saw what came out of the industry discussions, more films are being developed and as Greg said, the success for Apple’s F1 is encouraging for them. It's too early for us right now to give you our opinion on 2026, but nothing has changed our optimism about the direction that the industry is moving.
Greg Zimmerman (Executive VP and Chief Investment Officer)
I would add significantly, Amazon a couple of months ago announced that they were going to participate more in theatrical production over time.
Kyle Bonke (Analyst)
Gotcha. Understood. I think some of the performance at the TRS operating properties is or looks to be ahead of last year. I imagine some of that is due to the improving theater performance. It appears to be, I guess, trending ahead of neutral earnings contribution. Do you think that's fair to say at this point?
Mark Peterson (Executive VP and CFO)
I think second quarter was a great quarter for theaters versus the prior year quarter, which was fairly rough. Keep in mind it's kind of apples to oranges because we sold three theaters since last year. Yes, we did do quite a bit better quarter over quarter, and it's mostly due to theaters, as you said. That said, for the year the contribution will be fairly similar to the prior year. It had a nominal increase, a nominal difference last year between other income minus other expense. We expect a similar result as guidance implies and kind of a break even, theaters being ahead and offset by Cartwright being somewhat behind as far as, you know, FFO. I think our guidance implies kind of similar net results for the year, but certainly for the quarter we benefited by a quarter over quarter big improvement in theaters.
Kyle Bonke (Analyst)
Okay, understood. Thanks for the time.
Greg Silvers (Chairman and CEO)
Thank you.
Operator (participant)
Our last question will come from Anthony Paolone with JPMorgan. Anthony, you may now unmute your audio and ask your question.
Anthony Paolone (Analyst)
Thanks for the follow ups. Here, just two for me. One is just, is there any cap rate spread between larger and smaller deals?
Greg Silvers (Chairman and CEO)
Go ahead, Greg.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Yeah, for sure, Tony. I mean, I think you're probably looking at 25 basis points to 50 basis points spread, and I think Mark mentioned, obviously we're always looking for a spread of 100 basis points, but there are some strategic decisions we have to make too in terms of expanding our diversity and getting into spaces.
Anthony Paolone (Analyst)
Twenty-five to fifty basis points better on the large, I would say so.
Mark Peterson (Executive VP and CFO)
Do you agree with that?
Greg Silvers (Chairman and CEO)
Yeah, no, I think that's realistic.
Anthony Paolone (Analyst)
Okay. Just second one, Cartwright I think still makes up the bulk of the other sort of revenue and expenses and just seems to still be a break even-ish type asset. Can you maybe give us a sense of if there's anything to do there to monetize it or maybe even hazard a guess as to what that might be worth despite it not really doing much for earnings right now?
Greg Silvers (Chairman and CEO)
Yeah, I mean again, Tony, what we've said before is, candidly, we've struggled with the operating costs, the union that is there that makes it very, very difficult relative to how we see our other water park hotels operate as far as value. Again, it's nothing we would speculate on right now. We look at the project in its entirety with the gaming ground lease because, you know, the one was done to activate the other. It's not for lack of us working hard at trying to improve that. It's just some of the challenges that we're facing. We continue to note when we zig, there's zag kind of responses.
Anthony Paolone (Analyst)
Okay, thank you.
Greg Silvers (Chairman and CEO)
Thank you.
Greg Zimmerman (Executive VP and Chief Investment Officer)
Thanks.
Operator (participant)
There are no further questions, so I will now turn the call back over to Greg Silvers for any closing remarks.
Greg Silvers (Chairman and CEO)
I just want to say thank you, everyone. We look forward to talking with you in the coming months, and have a great day. Thanks, everyone. Thank you.
Operator (participant)
Thank you for joining EPR Properties Q2 2025 earnings call. This concludes today's call. You may now disconnect.